Average prices fell 0.3pc in December from a month earlier, the third successive fall. The National Bureau of Statistics recorded declines in 53 of China's 70 biggest cities. Used homes in Wenzhou dropped at an annualised rate of 45pc.

"Today's report is consistent with the unambiguously deteriorating trends seen in property sales, construction, starts and investments. The data just turned from bad to worse," said Wei Yao from Société Générale.

"The economy as a whole has not felt much chill yet, but the first half of 2012 is going to be difficult. Contraction in sales and sharp deceleration in investments will send shockwaves along the industry chain."

Economic growth remained strong in the fourth quarter at 8.9pc but leading indicators point to sluggish growth. Mark Williams, from Capital Economics, said home inventories had reached 30pc of completions in 2011, implying "much weaker construction" this year.

Nor is this confined to property. More than 800,000 unsold cars have piled up in warehouses. "This kind of stock could spiral out of control," said Liu Mingkang, China's former chief banking regulator. He said orders for new ships had dried up.

The authorities are walking fine line. They have imposed curbs to stop property speculation and wish to bring prices back down to earth, since price-to-income ratios have reached 16 to 18 in East coast cities and shut millions out of the market.

However, the boom has gone so far that even a light tap on the brakes risks setting off a disorderly downward slide. The property sector accounts for 13pc of GDP – comparable to Spain at the peak of the bubble. Ominously, housing starts contracted by 25pc in December.

Professor Patrick Chovanec from Beijing's Tsinghua University said China's economic growth would fall to 6.6pc if construction stabilised at today's level. "You don't need a real estate collapse to trigger a serious slowdown. All you need is a pause in the hitherto frantic pace of construction," he said.

A full-blown property bust would amount to an economic shock. The question is whether Beijing can calibrate a soft-landing with any more skill than policymakers in Washington, Tokyo, or Madrid once they had let housing bubbles get out of hand.